Question on FHA 203k loan...am i getting a bad deal??

I just received preapproval on a FHA 203k, not the streamline the full one, and I was quoted the following:

281,250 total preapproved limit

4.75% rate (quoted as up to, not locked yet)

estimated closing costs around 3.5%!!!!

Credit Scores - me - mid 680, hubby - mid 720

My husband feels like we are getting worked over on the closing cost estimate...and I feel like I'm seeing much lower interest rates around here. Is it because my scores are on the lower end???

Because I'm worried about having a knowledgeable lo in regards to the 203k, I don't want to do too much shopping around...but am I getting a bad deal??? I was super exccited about preapproval until I started thinking about the closing costs....

Re: Question on FHA 203k loan...am i getting a bad deal??

The closing costs are 3.5% of the loan? If so that's certainly in line and you aren't getting worked over there. To get a better expanation post the GFE numbers and we can tell you if anything jumps out as really high but overall the cost is about right. The rate does seem high but I'm not up to date on whether 203k has a higher rate than regular FHA but it's close to a full point higher than the plain jane FHA.

Re: Question on FHA 203k loan...am i getting a bad deal??

The closing costs are 3.5% of the loan? If so that's certainly in line and you aren't getting worked over there. To get a better expanation post the GFE numbers and we can tell you if anything jumps out as really high but overall the cost is about right. The rate does seem high but I'm not up to date on whether 203k has a higher rate than regular FHA but it's close to a full point higher than the plain jane FHA.

+1 Again Boomhower is right on point. 3.5% of the loan for closing costs including pre-paid expenses is average. As she states, look at your GFE to get the details, if something is out of line it will show there. Check with another lender or two to see if you can get a better rate.

Re: Question on FHA 203k loan...am i getting a bad deal??

I don't have my GFE yet...just so I am clear, it is normal for that to be 3.5% in addition to the 3.5% down payment amount?? My understanding is that the rate on the 203k loan is typically higher than standard FHA...thanks for all of your help!!

Re: Question on FHA 203k loan...am i getting a bad deal??

I just recently got my GFE for my FHA loan. I am at 4.25% and was told that was the standard - regardless of credit score - for an FHA 203k 49/51 loan, and my closing costs for $67k were around $10k - which is more than 3.5% of my loan. Your numbers seem right compared to mine.

Re: Question on FHA 203k loan...am i getting a bad deal??

Now I am wondering when I am supposed to receive the GFE??? We applied for preapproval on Monday, but are not under contract as we are in negotiations with the seller still (fingers crossed!!!). The 3.5% of loan closing costs were an estimate from my lender, who said that he couldn't work anything up until we know exactly what we are spending (purchase price plus renovations, etc.) I'm reading alot of people receive GFEs immediately after pre-approval??? Or is it not until under contract? Man, this is complicated!!!

Re: Question on FHA 203k loan...am i getting a bad deal??

I don't believe you can receive a GFE until you have a purchase agreement on a home. The bank can only predict your numbers until then. Right now it is still a guessing game. Here is a break down of how my process went and I will try to edit this once I get home to where all my paperwork is since I don't have exact dates in my head.

1. Recieve pre-approval from lender

2. Took home owners education class

3. Went shopping for a home

4. Had home checked for feasability (cost of home and repairs not to exceed pre-approval amount)

5. Made offer on house and offer was accepted - $1000 EMD to seller

6. Home inspection, appraisal, and repair work bid out

6. Mortgage company provides GFE

7. Repair work bids turned in- lowest bid accepted.

and that's as far as I am. I've turned in the final quote for the repair work and the lender has to work that in to finalize my numbers and send it through underwriting.

Re: Question on FHA 203k loan...am i getting a bad deal??

Most of the better lenders give you the figures along with your pre-approval based on the approval amount and certain assumptions. Those figures are estimates only. They might call the paperwork something like "closing costs worksheet" and it is an itemized estimate of expenses based on the loan amount, and an educated guess for taxes and insurance. I say guess because the actual amount of your real estate taxes and insurance can't be determined until you select a house.

Once you have the house under contract and make official application (you would have provided all your documentation for the pre-approal, but official application is when your loan gets put into the system); then the GFE has to be provided (this is a requirement) within 3 business days. A good lender gives you the GFE immediately (same day) you make application.

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